NEW BULLISH Plays
U.S. Concrete, Inc. - USCR - close: 59.84 change: -0.23
Stop Loss: 55.65
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 14, 2015
Time Frame: 6 to 8 weeks
Average Daily Volume = 220 thousand
New Positions: Yes, see below
USCR looks like a very impressive relative strength trade. This is a small cap stock. The small cap Russell 2000 index is down -4.6% year to date. Shares of USCR are up +110%.
They are part of the industrial goods sector. USCR is in the building materials business. According to the company,
"U.S. Concrete serves the construction industry in several major markets in the United States through two business segments: ready-mixed concrete and aggregate products. The Company has 139 standard ready-mixed concrete plants, 16 volumetric ready-mixed concrete facilities, and 12 producing aggregates facilities. During 2014, U.S. Concrete sold approximately 5.7 million cubic yards of ready-mixed concrete and approximately 4.7 million tons of aggregates."
The U.S. economy is only growing around +2% yet construction spending has rebounded to multi-year highs. A recent interview with the CEO of USCR revealed that they are benefitting from the building boom in several U.S. markets. According to the CEO their outlook is very healthy for the next two years. If President Obama signs the current highway spending bill it could provide an additional boost with multi-year funding for USCR.
Another bonus to being a U.S. based and domestically focused small cap company is how the rising dollar should not be a currency headwind for the company.
Earnings growth for USCR has been significant. Their Q1 report came out in May this year. The company blew away the estimates with revenues up +17%. Their Q2 numbers were even better. USCR crushed the numbers again with revenues up +35.7%.
USCR's most recent earnings report was November 5th. The company announced their Q3 results. Wall Street was looking for a profit of $1.10 a share on revenues of $282.3 million. USCR said earnings surged +85% from a year ago. Gross margins were up +310 basis points to 16.7%. Their revenues roared +49.4% to $295.11 million.
William J. Sandbrook, President and Chief Executive Officer of U.S. Concrete, stated,
"The third quarter marked another quarter of significant improvement in revenue, adjusted EBITDA and earnings per share reflecting solid execution on our core growth objectives. This sustained improvement is a strong validation of our entire operating strategy across our attractive construction material categories. During the quarter we grew our organic operations in all of our key regions, including Texas. Our ongoing consolidation efforts, established leadership positions, and focus on high barrier-to-entry projects allowed us to remain disciplined with our price, as evidenced by ready-mixed concrete prices increasing year-over-year for the 18th straight quarter. This pricing success, combined with our increasingly vertically integrated positions, delivered higher material spreads and very favorable incremental margins on our scalable platform. Additionally, during the quarter we further strengthened our vertically integrated capabilities with the addition of three strategic aggregate operations within key markets. As we look forward, we are encouraged by our prospects for further improvement as we continue to advance our long-term growth strategy."
Technically the stock is in a bullish up trend. Traders have been consistently buying the dips. The broader market retreated this past week while USCR managed to close nearly unchanged for the week (-20 cents). The point & figure chart is bullish and forecasting at $72.00 target. USCR appears to have short-term resistance at $60.50. Tonight we are suggesting a trigger to launch bullish positions at $60.75.
Trigger @ $60.75
- Suggested Positions -
Buy USCR stock @ $60.75
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.